US Intelligence Suspects Foreign Nations Of Using Corporate Takeovers To Get At Critical Tech

Foreign nations may be using a "coordinated strategy" of
corporate takeovers to access critical U.S. technology,
according to
a report highlighted
by the Financial Times from the Committee On Foreign
Investment in the United States:

Based on its assessment of transactions identified by CFIUS for
purposes of this report, the U.S. Intelligence Community
(“USIC”) judges with moderate confidence that there is
likely a coordinated strategy among one or more foreign
governments or companies to acquire U.S. companies involved in
research, development, or production of critical technologies for
which the United States is a leading producer.
Information supporting this assessment is provided in the
classified version of this report. Indications of other
coordinated strategies may go unobserved due to limitations on
intelligence collection, or may be hidden or
misconstrued because of foreign denial and deception
activities.

This is a big turnaround from last
year's report, which judged it "unlikely" that such a
coordinated strategy existed.

The details behind that assertion are classified, but the report
gives some examples of what could serve as evidence:

A pattern of actual or attempted acquisitions of U.S. firms
by foreign entities

Evidence that specific completed or attempted acquisitions of
companies with critical technologies had been ordered by
foreign governments or foreign government-controlled firms

The provision of narrowly targeted incentives by foreign
governments or foreign-controlled firms (e.g., grants,
concessionary loans, or tax breaks), especially those that
appear to market observers to be
disproportionately generous, to acquire U.S. firms with
critical technologies.

Here's a breakdown of which countries have made acquisitions that
the committee has deemed sensitive:

The report doesn't single out any particular company, but the FT
notes that the Obama administration
blocked a Chinese company, Ralls Corporation, from building a
wind farm in Oregon, which was the first such move in two
decades. The committee has yet to rule on CNOOC's
proposed takeover of Nexen, which was recently approved by
Canada.

It must weigh in on that takeover because Nexen has assets in the
United States.

Companies looking abroad for capital are going to have to be
aware of this new issue, which has often been speculated about
but rarely been acted upon.